Having a better job won’t improve your personal finances. What will help is improving your money management skills, so you can save, invest and achieve financial goals that you once thought were impossible.
If you feel your finances are a mess and the harder you try to get out of it, the deeper you get sucked back, trust us, all is not lost. Here are a few ideas which will definitely help you gain control over a spiraling situation.
1. Keep a track of your expenses
In order to improve your personal spending habits, you need to know what and where you are spending. Better money management always begins with awareness about spending habits. Track your spending across categories using an app and you will come to know how much money is being spent on non-essential things such as eating out, entertaining friends, gifting and clothes you don’t need, etc. Even that daily cup of coffee from Starbucks is very avoidable – once you notice how much you are actually saving over a month. Once you have become aware of where the money is going, you can make a robust plan to curtail unnecessary expenses.
2. Plan your monthly budget
This tip can never be over-emphasised. Having a monthly budget gives you an idea of how much you can allocate under which expense category. Calculate your incoming money – including money that has been gifted to you, a bonus, or any other source, and the amount from your paycheck – under one head. Then starting listing out expenses. The first rule of a budget is ‘pay yourself’. In other words, first keep aside the amount you think you can save every month. Then make a list of the essentials you need and then if some money is left – think of your desires and wants. Don’t over-skimp and feel deprived. View the budget as a way to encourage better money habits.
3. Create an emergency fund
It is important to have an emergency fund in hand. Typically, your emergency fund should be equal to six months of expenses. For instance, if you spend Rs. 10,000 a month, then your emergency fund will be 10,000 x 6 = 60,000. This will help you to avoid borrowing money at high-interest rates or being unable to pay your bills on time. This fund strengthens your financial security in the event of a job loss.
4. Avoid credit and loans
There are certain types of loans that you can avail – for eg home loans or car loans. However, cash is often the best way forward for purchases such as big home appliances – like the latest TV or fridge or washing machine. When you buy in cash, you avoid generating interest and creating a debt situation. You also get good discounts.
These basic ideas can help you build a stronger financial foundation for your future, and help you and your family feel more secure.
